S&P Futures Tick Higher as Rate Hike Fears Subside, Chinese Inflation Data Disappoints

Oleksandr Pylypenko - Barchart - Fri Jun 9, 2023

June S&P 500 futures (ESM23) are trending up +0.04% this morning after three major U.S. benchmark indices closed higher on Thursday as an unexpected rise in weekly U.S. jobless claims bolstered expectations that the Federal Reserve would hold rates steady next week, while investors also digested weaker-than-expected inflation data from China.

In Thursday’s trading session, the tech-heavy Nasdaq 100 outperformed the other two indices as the jump in jobless claims to the highest level since October 2021 knocked U.S. Treasury yields lower. Warner Bros Discovery Inc (WBD) surged over +6% and was the top percentage gainer on the Nasdaq 100 and S&P 500, extending its gains to a second straight day following a report that the ad-based tier of its Max streaming service could be included in Amazon's Prime Video Channels roundup. Also, Adobe Systems Incorporated (ADBE) climbed about +5% after the company introduced a generative AI tool, Sensei GenAI, across Adobe Experience Cloud applications for enterprises and launched an enterprise tier for its AI art tool, Firefly. In addition, Amazon.com Inc (AMZN) rose over +2% after Wells Fargo started coverage on the stock with an Overweight rating. At the same time, GameStop Corp (GME) plunged over -17% after firing its chief executive and reporting downbeat Q1 results.

Economic data on Thursday showed weekly initial jobless claims rose to a 19-month high of 261K, significantly higher than the expected figure of 235K, pointing to signs of cooling in the highly resilient labor market.

“We remain of the view that the risk of a full-blown layoff cycle later in the Summer remains substantial as businesses will look to cut costs and recapture more margin,” Jefferies said in a note.

Meanwhile, U.S. rate futures have priced in a 75.9% probability of no hike and a 24.1% chance of a 25 basis point rate increase at the upcoming monetary policy meeting.

The U.S. economic data slate is mainly empty on Friday.

In the bond markets, United States 10-Year rates are at 3.750%, up +1.01%.

The Euro Stoxx 50 futures are down -0.16% this morning as weak Chinese inflation data dampened the positive sentiment stemming from the overnight rally on Wall Street. Losses in chemical stocks are leading the overall market lower following a downbeat earnings statement from Croda International Plc (CRDA.LN). Meanwhile, investor attention has shifted toward the upcoming policy meetings of the U.S. Federal Reserve and the European Central Bank next week. The ECB is widely expected to raise interest rates by a further 25 basis points. In corporate news, shares of Norsk Hydro ASA (NHY.O.DX) rose over +1% after the company agreed to buy land in Spain for the construction of an aluminum recycling plant.

Italy’s Industrial Production data was released today.

The Italian April Industrial Production has been reported at -1.9% m/m and -7.2% y/y, weaker than expectations of +0.1% m/m and -4.1% y/y.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.55%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.97%.

China’s Shanghai Composite today closed higher as disappointing inflation data bolstered bets that Beijing will roll out more stimulus measures this year to shore up growth. Official data on Friday showed that Chinese consumer inflation fell in May from the prior month, while the country’s factory gate prices shrank at the fastest pace in seven years. Meanwhile, Shanghai’s tech-heavy STAR market rose on Friday following a commitment from the country’s securities regulators to bolster technology self-reliance through the introduction of new capital market policies. Morgan Stanley highlighted the potential visit of U.S. Secretary of State Antony Blinken to China as an indication of improving relations between the United States and China. On the negative side, Hangzhou Hikvision Digital Technology Co Ltd plunged over -6% following news that the U.K. would remove Chinese-made surveillance equipment from sensitive government sites.

The Chinese May CPI stood at -0.2% m/m and +0.2% y/y, weaker than expectations of -0.1% m/m and +0.3% y/y.

The Chinese May PPI came in at -4.6% y/y, weaker than expectations of -4.3% y/y.

Japan’s Nikkei 225 Stock Index closed sharply higher today, posting a ninth straight weekly gain as buying accelerated after new U.S. labor market data pushed up bets that the Fed would skip an interest rate hike next week. Also, a weaker yen boosted export-oriented stocks. In addition, sentiment toward Japanese stocks was buoyed by positive economic readings from the country, notably the upward revision in first-quarter GDP. Meanwhile, Ichigo Inc. rose over +1% after the company announced it would acquire shares of Ichigo Hotel REIT Investment for a maximum of 1 billion yen. Exchange data showed that foreign investors bought a total of 2.4 trillion yen of Japanese stocks in May, the most since April 2013. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 5.37% and hit a new 6-month high of 23.16.

Pre-Market U.S. Stock Movers

General Motors Company (GM) rose over +3% in pre-market trading after announcing a collaboration with Tesla to integrate the North American Charging Standard connector design into its electric vehicles beginning in 2025. Tesla Inc (TSLA) gained more than +4% in pre-market trading.

Braze Inc (BRZE) surged over +8% in pre-market trading after the company reported upbeat Q1 results and raised its FY24 guidance.

DocuSign Inc (DOCU) climbed more than +8% in pre-market trading after the company posted better-than-expected Q1 results and lifted its FY24 revenue outlook.

Planet Labs PBC (PL) plunged about -16% in pre-market trading after the company reported mixed Q1 results and provided soft Q2 and FY24 revenue guidance.

Corning Incorporated (GLW) rose over +2% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight.

Qualys Inc (QLYS) slid more than -2% in pre-market trading after Piper Sandler downgraded the stock to Underweight from Neutral.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Friday - June 9th

Nathans Famous (NATH), ETV California MBF (EVM), Renalytix AI Nas (RNLX), Tuniu Corp (TOUR), Anixa Biosciences (ANIX).

More Stock Market News from Barchart

On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.